U.K. Pound Advances Versus Dollar After Treasuries Sales

Dec. 29 (Bloomberg) -- The pound rose against the dollar
for the first day in three as a poorly received U.S. Treasury
auction yesterday damped demand for the U.S. currency.

Sterling rebounded after nearing its lowest level in almost
four months against the dollar. It was little changed against
the euro. Treasuries fell yesterday after the $35 billion five-year sale. Bids totaled 2.61 times the available amount, the
least since June.

“The main thing in the last 24 hours is the bad U.S.
auction yesterday, so the dollar is mildly softer,” said Geoff
Kendrick, head of European foreign-exchange strategy at Nomura
Holdings in London. Kendrick and others, including Neil Mellor,
a currency strategist in London at Bank of New York Mellon
Corp., said there’s thin trading on markets this week and all
moves should be viewed in that context.

The pound rose against the dollar, climbing 0.6 percent to
$1.5459 as of 5:10 p.m. in London. That was its first advance in
three days, after it fell to $1.5345 yesterday, its weakest
level since Sept. 7.

Against the euro the British currency strengthened
0.1 percent to 85.26 pence.

The pound has fallen 3.1 percent in the past month and 6.9
percent this year, according to Bloomberg Correlation-Weighted
Currency Indexes. The dollar has dropped 2.2 percent this year,
while the euro has lost 11 percent, the indexes show.

“People are not viewing the U.K.’s recovery with the same
amount of confidence as previously envisaged,” said Geoffrey
Yu, a foreign-exchange strategist at UBS AG in London.

U.K. Unemployment

U.K. unemployment will rise in 2011 in what will be a
“worse” year for hiring as the government cuts public jobs to
reduce the budget deficit, the Chartered Institute of Personnel
and Development said.

Payrolls will drop by 200,000 next year, with public-sector
employment falling by 120,000 and private-sector jobs by 80,000,
the London-based group said in a report today. Unemployment may
rise to 9 percent, it added.

“It will be a ‘fingers-crossed’ year for the economy,”
CIPD Chief Economic Adviser John Philpott said in the report.

The U.K. economy will grow 1.9 percent in 2011, after
expanding 1.8 percent this year, according to a Bloomberg survey
of 24 analysts. That compares to a forecast of 2.6 percent
growth for the U.S. economy next year, a separate survey showed.

The U.K. Debt Management Office plans to sell 2.75 billion
pounds of 3.75 percent bonds maturing in September 2020 on
Jan. 6, the agency said in a statement.

The 10-year gilt yield advanced to the highest level in
more than a week, adding five basis points to 3.56 percent. It
reached 3.65 percent on Dec. 16, the highest since May 20. The
4.75 percent security maturing in March 2020 fell 0.42, or 4.2
pounds per 1,000-pound face amount, to 109.22. The two-year note
yield was one basis point higher at 1.24 percent.

Gilts returned 6.6 percent this year, according to indexes
compiled by the European Federation of Financial Analysts
Societies and Bloomberg. Treasuries gained 5.0 percent and
German debt, the euro-area’s benchmark securities, returned 6.2
percent, the EFFAS indexes show.